On tonight’s MAD MONEY on CNBC, Jim Cramer said that he thinks defense and aerospace is becoming the seventh bull market. He thinks that the recent huge contract to Saudi Arabia for military orders will be a big win. Saudi Arabia gets $20 Billion in defense and over $30 Billion is being granted to Israel in US defense grants. Cramer also thinks Democrats would spend a lot on defense to look strong and we spend more than anyone else by far for defense. Cramer gave Lockheed Martin (NYSE:LMT) last week. He’s got two more great US defense contractor plays for the sector:
The first play is Alliant Tech (NYSE:ATK) as the largest bullet manufacturer and is in big into projectiles of all sorts. He thinks it is cheap at 1.3-times growth and he thinks numbers could come up with an upside surprise because of its share buyback plan. This reports Thursday, so Cramer noted to only put on a half position so you don’t have the earnings exposure as bad. Alliant was my number one defense stock for the BAIT SHOP in takeover candidates (see post here), although I haven’t updated that position in a while.
Cramer’s favorite defense play is Raytheon (NYSE:RTN) because it is the most leveraged name to defense spending, and because it is the cheapest according to his growth rate over P/E analysis. He isn’t looking for a buyout or anything, but it won two big contracts in June that will help with visibility. It also raised fiscal guidance and has a great balance sheet with debt retirement and share buybacks.
Jon C. Ogg
July 31, 2007
Jon Ogg can be reached at firstname.lastname@example.org; he does not own securities in the companies he covers.